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Calpers' 1% return for the fiscal year ended June 30 leaves it far short of its annual 7.5%...

Calpers' 1% return for the fiscal year ended June 30 leaves it far short of its annual 7.5% target and could force the state of California and its cities to cough up more to the $233B retirement system to make up for the shortfall. CIO Joe Dear says the fund's target is attainable, though he acknowledged "we are going to have to employ new strategies."
Comments (18)
  • uglyowl
    , contributor
    Comments (14) | Send Message
    1. Goal of 6.5% in five and half months
    2. "we are going to have to employ new strategies."


    This isn't going to end well.
    16 Jul 2012, 06:46 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5152) | Send Message
    CIO Joe Dear needs to look for a new job. He is entrusted with billions of dollars and manages a 1% return! You are able to earn 1% with a saving account. I am sure Mr. Dear is another "smartest person in the room."


    Where was the red flag months ago when it had to be apparent that the 7.5% was never going to be reaced? "New strategies have to be employed." This could be the quote of the year.


    JPM is looking to replace their CIO. Perfect job for Mr. Dear with JPM, where billion dollar losses are not frowned upon.
    16 Jul 2012, 06:57 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8165) | Send Message
    California is America's Greece.
    16 Jul 2012, 07:00 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
    Maybe Calpers will have to hire GS to "fix the books" for them so they can show something greater than a 1% return.
    17 Jul 2012, 09:49 AM Reply Like
    , contributor
    Comments (10252) | Send Message
    This is pure unadulterated BS.


    No discussion here about changing the benefits under the retirement plans so that a goal of - say 4% - would be able to meet the obligations of the plan.


    Of course another approach is for CALPERS to buy an annuity for everyone. Or cash them out of their pension and let all such pensioneers (is that a word?) take care of their own plan..... like I have to do.
    16 Jul 2012, 07:02 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5152) | Send Message
    After reading that they are going to earn 1%, pensioneers (it is a word now) would have to be glad to manage their own money.


    If they cash out their pension, I would imagine it would play out like the run on Bailey Building and Loan in It's A Wonderful Life. CIO Dear better hope old Uncle Billy misplaced the money needed to keep the pension afloat.


    Sadly, when I read this, I was not shocked that it occured in California.
    16 Jul 2012, 07:07 PM Reply Like
  • bearfund
    , contributor
    Comments (1534) | Send Message
    Cashing everyone out would move even large markets; CalPERS is enormous. I'm all for it in principle but it would need to be done over a period of years. All the more reason to start right away!


    More realistically, it's silly to focus on returns that include changes in market price. The important factors are instead: how much income did the portfolio generate? and how much permanent loss of capital occurred? Take those figures and compare them with the pension fund's liabilities and projections and see how things look. An open pension fund like CalPERS has no maturity date; it's just a pipeline in the same way as an insurance company's float. As long as its net investment income less permanent losses is enough to cover the gap between its obligations and current contributions, it's healthy. By focusing on market price driven returns, we obscure the true condition of the fund (which is probably even worse than supposed; I doubt those highly appreciated bonds and "growth stocks" are generating much income).
    17 Jul 2012, 09:55 AM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4181) | Send Message
    "We are going to have to employ new strategies" sounds kinda like "We're gonna need a bigger boat."


    I think the word is "pensioners" but I like "pensioneers" better. :)


    Sadly, I live in California.
    16 Jul 2012, 07:41 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5152) | Send Message
    My condolences on living in CA :) Hopefully you are not a CA pensioneer getting a whopping 1% return. (This can't be correct, can it?) A team of investment specialists can only earn 1%.


    Do you think that CIO Dear got more than a 1% raise y/y?


    Time to "clawback" raises, in my opinion. (I try to use the term "clawback" at least once a day)


    Have a good evening/afternoon in CA.
    16 Jul 2012, 07:55 PM Reply Like
  • Hubert Biagi
    , contributor
    Comments (689) | Send Message
    What are you talking about? Pensions are untouchable in CA, whatever the return may be. If I lose money in the market, it's gone. But if you're on a pension, you just go back to the taxpayer to make up the difference. It's totally obscene. Hopefully, the states will continue to break the unions. I'm getting tired of funding retired millionaire county workers.
    16 Jul 2012, 10:02 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5152) | Send Message
    Individual pensioneers can't simply "go back to the taxpayer to make up the difference", at least not in NY. I am not sure how things work in CA, but if cities are declaring bankruptcy, I would imagine that kicking more money into the retirement system probably isn't going to happen.


    There is a website- - that lists NY state employee salaries and, just added, pension information. I am not sure if CA has somehthing like this, but it is an eye-opener.


    Back to my original point. How can Calpers, or any other group charged with running a pension fund, or any other fund for that matter, earn 1%?


    1% return? That is totally obscene, in my opinion.
    16 Jul 2012, 10:24 PM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4181) | Send Message
    Thanks, deercreek. :)


    Fortunately, I'm not dependent on Calpers for my pension! I retired from a county job with an under-$50k/yr pension, and the pension fund seems to be holding its own at the moment.That 1% is pretty dismal, they'd have to be making a whole lot of bad investment choices to earn that rate. Or who knows what other bad choices. :/


    Oh yeah. CA has the highest-paid government pensioners in the nation. It's obscene. New governor is working hard on a pension reform bill. If they'd just start at the top and cut them all down to under 6 figures, that would probably go a long way to solving the problem.
    16 Jul 2012, 08:09 PM Reply Like
  • phxcrane
    , contributor
    Comments (415) | Send Message
    It doesn't matter if you have a pension from CA. There going to make up the difference with Taxes. Imagine if they lose 2 or 3 percent. If their is a Democrat in the white house the whole country will end up paying for it.
    16 Jul 2012, 09:10 PM Reply Like
  • Furbonacci
    , contributor
    Comments (370) | Send Message
    in rhode island we do it much better.
    16 Jul 2012, 10:41 PM Reply Like
  • Exquisite Decay
    , contributor
    Comments (153) | Send Message
    They could ask the employees to contribute a higher percentage of their pay, but that is not likely to pass.


    10 years ago I held local office in California. Our pension provider was not financially sound so we needed to move the pension. We moved it to Calpers but at the same time the other members of the board voted to increase the pension benefits substantially without requiring any additional amount from the employees. We could hardly fund the defined benefits pension before. Shortly thereafter, the actuarial report said we were under-funded by about $650K for the year(no surprise there). This was about 10% of our annual budget. Also, we would need about that additional amount every year to meet the future pension benefits. We did not have that amount of cash just sitting around. So the board decided to have a special property tax assessment that would bring in an extra $650K a year. But this had to go the public for a vote. The board knew it would not pass if we said it was to provide for increased pension benefits so they said it was to provide for more policing at the parks and other safety issues. I was the only board member to vote and campaign against this nonsense trying to point out the real reason for this tax assessment.
    16 Jul 2012, 10:44 PM Reply Like
  • Alvin5007
    , contributor
    Comments (147) | Send Message
    I bet you weren't re-elected. Who was it that said: "A democracy can survive until the people realize that they can vote benefits for themselves from the public treasury"? I've heard this sourced to de Tocqueville.
    17 Jul 2012, 08:39 AM Reply Like
  • Exquisite Decay
    , contributor
    Comments (153) | Send Message
    You are correct; I lost.
    17 Jul 2012, 10:13 AM Reply Like
  • Exquisite Decay
    , contributor
    Comments (153) | Send Message
    Here is another good quote.
    "When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
    --Frederic Bastiat
    17 Jul 2012, 11:24 AM Reply Like
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